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Federal Deception Law: 10.9.2 Arbitration Requirements and Whistleblower Retaliation Claims

While the FCA claims brought on behalf of the government are likely not subject to a relator’s arbitration agreement,144 the majority of courts now conclude that the federal False Claims Act’s protections against retaliation for whistleblowers are subject to such arbitration agreements.145 Whereas qui tam claims belong to the government, retaliation claims—though part of a statutory scheme that supports false claims acts—run to the benefit of the whistleblower.

Federal Deception Law: 10.11 Other Statutes That Give Rewards to Whistleblowers

In the last several years, Congress has enacted several statutes that broaden the areas within which whistleblowers may receive incentives for reporting fraud. The Motor Vehicle Safety Whistleblower Act (MVSWA), enacted in December 2015, offers monetary incentives to industry insiders who report information about auto safety issues that are likely to cause unreasonable risk of death or serious physical injury.166 It was passed in the wake of several high-profile safety controversies concerning Volkswagen, General Motors and others.

Federal Deception Law: 10.12 The False Claims Act Checklist

Because of the procedural and substantive requirements of the FCA, it is extremely important that any attorney considering filing an FCA case associate with an attorney specializing in this area or at least consult with an experienced FCA practitioner. However, the following checklist should provide some initial guidance in assessing whether a potential False Claims Act cause of action is possible:

Federal Deception Law: 8.1.1 The Structure of RICO

The federal Racketeer Influenced and Corrupt Organization (RICO) Act1 is a complex statute that imposes criminal and civil penalties and permits treble damages when a defendant uses one of two methods to engage with an identified enterprise in any one of four prohibited ways. The two methods are (1) a pattern of racketeering activity and (2) the collection of an unlawful debt.2 The four prohibited ways of engaging with an enterprise are spelled out in 18 U.S.C. § 1962:

Federal Deception Law: 8.1.2 Advantages and Disadvantages of RICO Claims

The advantages of a RICO claim are straightforward: federal court jurisdiction, treble damages, attorney fees, an extremely broad scope, and the ability to raise claims against third parties that did not deal directly with the consumer. The increased monetary exposure resulting from the threat of treble damages and attorney fees may lead a RICO defendant to be more willing to resolve the case or to resolve it on more favorable terms than it might do in the ordinary civil lawsuit.

Federal Deception Law: 8.1.4 RICO’s Interstate or Foreign Commerce Requirement

RICO claims must allege an enterprise “which is engaged in, or the activities of which affect, interstate or foreign commerce.”33 The requisite connection with commerce need only be “minimal”34 or “insubstantial.”35 Use of the mail to execute a fraudulent scheme satisfies the requirement; in other words, predicate offenses of mail fraud sufficiently meet the interstate commerce requirement in and of themselves.

Federal Deception Law: 8.1.5 Liberal Construction

Many federal courts initially reacted with hostility to civil RICO actions in scenarios remote from organized crime conducted by professional criminals. Courts interpreted RICO—especially civil RICO—restrictively, dismissing many actions at the pleading stage.

Federal Deception Law: 8.2 The RICO Defendant

RICO refers to the RICO defendant as the “person” and defines “person” as “including any individual or entity capable of holding a legal or beneficial interest in property.”56 Only certain narrow exceptions to this broad definition of person exist.

Federal Deception Law: 8.3.1 Introduction

RICO targets two types of methods of engaging with an enterprise: “a pattern of racketeering activity” and “collection of an unlawful debt.”68 RICO prohibits these methods only when they have one of four enumerated relationships to an enterprise, as described in § 8.5, infra.

Federal Deception Law: 8.3.2.1 General

The first method of engaging with an enterprise that RICO targets is the use of a pattern of racketeering activity.69 RICO defines racketeering activity as an indictable act under one of nine generic categories of state crimes or under one of about fifty enumerated federal crimes.70 These are called “predicate offenses.” A violation of a statute, such as a UDAP statute, cannot be a predicate offense if it is not enumerated in RICO.71 Most con

Federal Deception Law: 8.3.2.2 Elements of Mail Fraud

The elements of mail fraud are a scheme to defraud and a mailing made for the purpose of executing the scheme.72 The mail and wire fraud statutes address a broader scope of fraud than common law fraud does.73 It is not necessary that anyone actually be defrauded.74 Nor is it necessary that the mailings themselves include any misrepresentations or contribute directly to the deception of the plaintiffs, so long as they are part of a scheme to d

Federal Deception Law: 8.3.2.4 Aiding and Abetting Mail Fraud

Can aiding and abetting mail fraud itself be a predicate act under RICO? Note that this question differs from the question of whether RICO imposes liability for aiding and abetting a RICO violation; most circuit courts have ruled that it does not, at least for claims arising under section 1962(c).103 RICO defines “predicate offense” as “any act which is indictable under . . .

Federal Deception Law: 8.3.2.5 Wire Fraud

For RICO purposes, wire fraud107 and mail fraud108 are treated in virtually identical fashion.109 The only difference is that wire fraud requires an interstate communication,110 typically by the internet, email, or telephone.

Federal Deception Law: 8.3.3.1 Introduction

Racketeering activity is not actionable unless there is a “pattern” of racketeering activity.116 A pattern of racketeering activity “requires at least two acts of racketeering activity.”117 However, these acts can both serve the same criminal scheme.118 Courts have great difficulty defining “pattern” of racketeering activity, and this remains one of the haziest aspects of RICO law. The U.S.

Federal Deception Law: 8.3.3.2 Supreme Court Guidance

The first Supreme Court case to address the “pattern” requirement, Sedima, S.P.R.L. v. Imrex Co.,119 did not define the term but indicated that the commission of two predicate offenses, while necessary, may not suffice to establish a pattern:

Federal Deception Law: 8.3.3.4 Open-Ended Continuity

In contrast to closed-ended continuity, which primarily depends on time, open-ended continuity depends primarily on a threat that the defendant will continue its criminal activity.140 To ascertain such a threat, courts will examine the nature of the predicate offenses alleged or the nature of the enterprise on whose behalf the predicate offenses were performed.141

Federal Deception Law: 8.3.3.6 Factors Facilitating Proof of a Pattern

Although the “pattern” and “enterprise” elements of a RICO claim are distinct and each must be independently proven, the same evidence may prove both.158 In addition, most courts hold that a plaintiff need not be injured by a practice to plead it as part of the pattern of racketeering activity,159 so long as the plaintiff otherwise meets the requirement of injury to business or property.160

Federal Deception Law: 8.3.4 Collection of an Unlawful Debt

Attorneys can easily overlook the fact that RICO targets the engagement in an enterprise not just through a pattern of racketeering activity but also through “collection of an unlawful debt.”161 An unlawful debt is defined to include a usurious debt that is unenforceable in whole or in part as to interest or principal and that bears an interest rate of at least twice the enforceable rate.162

Federal Deception Law: 8.4.3.1 Introduction

Once a plaintiff has identified the associates, the plaintiff must show an association among them to establish an “association-in-fact enterprise.” In 1981, in United States v. Turkette,196 the Supreme Court concluded that such an enterprise is “proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.”197 In 2009, in Boyle v.